Niveshdaily: From Research Desk

NiveshDaily

May 05, 2017

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(As on 4th May, 2017)
 Sector Update – Metal & Mining
National Steel Policy 2017

 Result Preview

Apcotex Ltd. | Rating: BUY | Target: Rs 444
The company’s technology, experience and clientele remain a significant entry barrier.

These advantages lead Apcotex to gain leadership in Performance Emulsion Polymers
segment in India.

NIIT Technologies Ltd. | Rating: BUY | Target: Rs 596
Revenue is expected to remain flattish/ marginally higher due to seasonal slowdown in
GIS business which may partially be offset by BFSI business.

 Result Update
Ajanta Pharma Ltd.
Subdued quarter but key growth driver (ramp up in US markets) remains intact

Alembic Pharmaceuticals (ALPM)
New launches in US remain critical for growth. Q4FY17 results were inline with our
estimates.
Exide Industries Ltd.
Inline with estimates, downgrading to HOLD owing to recent run‐up with a TP of Rs. 234

 Monthly Auto Numbers | April 2017
 Result Today in INSL Universe

Daljeet S. Kohli
Head of Research
Tel: +91 22 62406211
daljeet.kohli@indianivesh.in
IndiaNivesh Securities Limited | Research Analyst SEBI Registration No. INH000000511
IndiaNivesh Research 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800

IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.

National Steel Policy 2017
Target 300MT capacity by 2030‐31

The Union Cabinet on Wednesday approved National Steel policy (NSP) 2017 which
Daljeet S. Kohli enshrines the long term vision of the Government to give impetus to the steel sector
Head of Research
and boost it’s Make in India policy. The policy projects crude steel capacity to grow
Tel: +91 22 62406211 at CAGR of c7% from current capacity (FY2017) of c125 million tonnes (MT) to 300
daljeet.kohli@indianivesh.in MT in FY2031. The policy envisages total investment of Rs.10,000 Bn. for the said

capacity expansion. Along with the NSP, cabinet has also approved policy that

mandates to give preference to Domestically Manufactured Iron & Steel Products
Kamal Kant Sahoo
Research Associate (DM1&SP) and will be applicable on all government tenders where price bid is yet to
be opened. The major portion on new demand is likely to come from construction
Tel: +91 22 62406451
and manufacturing sectors. India’s current per capita consumption of steel at c61kg
kamal.sahoo@indianivesh.in
(rural consumption‐ c10kg) is much lower than the global average of 208kg. The

policy envisages increase in per capita consumption to 160kg by 2030. The
government focus on rural and urban infrastructure, affordable housing, expansion
of railway networks and development of domestic shipbuilding industry are expected
to create significant demand for steel in the country. However, achieving crude steel
capacity up to 300 MT will require extensive mobilization of natural resources,
finances, manpower and infrastructure including land.

Our View: We view the capacity addition target to be optimistic given the backdrop
of subdued global demand and excess capacity globally. According to World Steel
Association, global steel demand will increase by 1.3% to 1,535.2 MT in 2017,
following growth of 1.0% in 2016. In 2018, it is forecast that global steel demand will
grow by 0.9% and will reach 1,548.5 MT. While steel demand in China will remain flat
in 2017 and decline by 2% in 2018. The excess capacity and dumping by China will
keep check on the steel prices and prevent fresh investment by private sector in
India. However, the policy to give preference to the domestic products in
government procurement and government spending on infrastructure and housing
projects will bode well for the domestic steel companies. Currently, infrastructure
spending in India stands at c8% of GDP and going forward it is likely to increase over
10%. The policy anticipates 10x growth in steel consumption by infra sector to 90 MT
by 2030‐31. While we believe incremental capacity addition of c175 MT by 2030‐31
to be optimistic; the installed capacity is likely to grow to c150 MT by 2020 once
projects under construction are online. The key risk to achieve the policy target is
excess capacity globally and high debt level of domestic steel companies makes them
unviable to fund expansion projects.

IndiaNivesh Securities Limited|Research Analyst SEBI Registration No:INH0000000511
IndiaNivesh Securities Ltd 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800


Sector Update | National Steel Policy 2017

National Steel Policy (NSP) Outlook in Charts
Steel Consumption 2015‐16 (in MT) Steel Consumption 2030‐31 (in MT)

Source: NSP, IndiaNivesh Research Source: NSP, IndiaNivesh Research

Per Capita Steel Consumption (in Kg)
Source: WSA, IndiaNivesh Research

Capacity Expansion (in MT)
Source: NSP, IndiaNivesh Research

IndiaNivesh Securities Ltd 5 May 2017 2 of 3

Sector Update | National Steel Policy 2017
List of Top 10 Countries by Steel Production (in MT)
Ranking Country CY 2012 CY 2013 CY 2014 CY 2015 CY 2016

724.7 779 822.7 803.83 808.37
1 People's Republic of China

107.2 110.6 110.67 105.15 104.77
2 Japan

77.3 81.2 87.29 89.58 95.62
3 India

88.6 87 88.17 78.92 78.62
4 United States

70.6 69.4 71.46 71.11 70.8
5 Russia

69.3 66 71.54 69.73 68.57
6 South Korea

42.7 42.6 42.94 42.68 42.08
7 Germany

35.9 34.7 34.04 31.52 33.16
8 Turkey

34.7 34.2 33.9 33.25 30.21
9 Brazil

32.9 32.8 27.17 22.93 24.22
10 Ukraine
Source: WSA, INSL Research

Daljeet S. Kohli Result Preview
Head of Research

Tel: +91 22 62406211
daljeet.kohli@indianivesh.in Apcotex Ltd. | Rating: BUY | Target: Rs 444
Apcotex Ltd (Rs. in Mn) Q4FY17E Q4FY16 Q3FY17 Y‐Y Change% Q‐Q Change%
REVENUES 963 676 1039 42.5 ‐7.4
Kamal Kant Sahoo EBITDA 59 89 62 ‐33.7 ‐4.8
Research Associate
PAT 30 86 52 ‐65.1 ‐41.7
Tel: +91 22 62406451 EBITDA MARGIN % 6.1 13.2 6.0 ‐704 bps 16 bps
kamal.sahoo@indianivesh.in PAT MARGIN % 3.1 12.7 5.0 ‐961 bps ‐184 bps
Source: Company, IndiaNivesh

We expect APCOTEX to deliver subdued results in Q4FY17 owing to weaker demand and
strike at Taloja plant, which resulted in an estimated loss of ~ Rs. 180 mn. The production
of hystyrene rubber was shifted to Valia, Gujurata plant. We expect margin to contract on
account of higher cost of production at Valia Plant as compared to Taloja. For Q4FY17, we
expect Apcotex to report revenue of Rs 963 mn (~43% up Y/Y and 7% down Q/Q) and
EBITDA of Rs 59 mn.
We expect an EBITDA margin of 6.1% in Q4FY17 vs 13.2% in 4QFY16 on account of higher
cost of production due to shifting of HSR production from Taloja to Valia. However, we
sense that the resumption of HSR production from Taloja plant in second half of this
quarter will lower the pressure on cost front. Going forward we expect the PAT to decline
by 65% Y/Y to Rs.30 mn.

Valuation:
At CMP of Rs.381, the stock is trading at 13.4x FY18E EV/EBITDA estimates. The company’s
technology, experience and clientele remain a significant entry barrier. These advantages
lead Apcotex to gain leadership in Performance Emulsion Polymers segment in India. The
resumption of operations from Taloja plant will improve gross margin going ahead. We will
review our estimates, rating and target price post the results.

IndiaNivesh Research May 05, 2017

Daljeet S. Kohli NIIT Technologies Ltd. | Rating: BUY | Target: Rs 596
Head of Research Q4FY17E Q3FY17 Q4FY16 Q‐o‐Q% ch. Y‐o‐Y% ch.
Tel: +91 22 62406211 Net Sales (Rs. Mn) 7060 6922 6847 2.0% 3.1%

daljeet.kohli@indianivesh.in EBITDA 1165 1168 1261 ‐0.3% ‐7.6%
Net Profit 679 654 790 3.8% ‐14.1%

Saptarshi Mukherjee bps

Research Associate
EBITDA Margin % 16.5% 16.9% 18.4% ‐37 ‐192
Tel: +91 22 62406453 PAT Margin % 9.6% 9.4% 11.5% 17 ‐192
saptarshi.mukherjee@indianivesh.in Source: Company, IndiaNivesh Research

Updates:
 Revenue is expected to remain flattish/ marginally higher due to seasonal slowdown in
GIS business which may partially be offset by BFSI business. Topline is expected to take
a hit from insurance business too.
 EBITDA margins may contract by 37 bps Q/Q to 16.5% in Q4FY17E on account of wage
hikes and visa related costs. PAT margin is expected to improve marginally by 17bps
Q/Q to 9.6% as company received agreed payments from Indian government contracts
as settlement agreement of Rs.419 nm which will result in revenue recognition of
Rs.271mn for the services contracted.

Key things to watch out for:
(1) Fresh order intake, (2) revenue and margin outlook, and (3) order booking in key
geographies like US.

Valuation:
At the CMP of Rs.479, the stock is trading at 9.9x FY18E earnings estimates. We maintain
BUY with TP to Rs.596 (Valuing 12.3x FY18E) on stock.


Ajanta Pharma Ltd.
Subdued quarter but key growth driver (ramp up in US markets)

remains intact

Current Previous
Ajanta Pharma (AJP IN) financial performance in Q4FY17 was lower than our
CMP : Rs 1640 estimates on all parameters mainly due to lower growth in domestic
Rating : HOLD Rating : HOLD formulation (DF) & slower ramp up in US market. DF growth was driven
Target : Rs 1751 Target : Rs 1782 primarily by cardiology and ophthalmology segment. Exports (especially ramp
(NR‐Not Rated)

up in US) remain the key driver of growth for the company in future. The

company has increased filings in US. It intends to file for 12‐15 ANDA in US in

FY18 v/s 8 filings done in FY17. Currently AJP has 12 commercialized products

out of 17 approvals in place. We remain positive on AJP over robust ANDA

pipeline, less regulatory risk, sustained outperformance in DF and increased

R&D effort for regulated market. At CMP of Rs 1640, the stock is trading at 25x

FY18E EPS of 66.3 and 21x FY19E EPS of Rs 79.6. We have HOLD rating with

price target of Rs 1751, based on 21x FY19E earnings (unchanged).

Particulars Variance

(Rs Mn) Q4FY17 Q4FY16 Q3FY17 YoY % QoQ % INSPL Est (%)

Net Sales 4,561 4,241 5,150 7.6 (11.4) 5,117 (10.9)

EBITDA 1,407 1,352 1,599 4.1 (12.0) 1,589 (11.4)

Adj PAT 1,140 1,090 1,325 4.6 (13.9) 1,341 (15.0)

Reported PAT 1,131 1,101 1,417 2.7 (20.2) 1,341 (15.7)

Source: Company, IndiaNivesh Research

Q4FY17 performance

Though gross margin up 229 bps y‐y, EBITDA margin is down 104bps y‐y due to

higher R&D spent:

Sales of AJP was Rs4.56bn, up ~8% y‐y, for the quarter. The y‐y growth in sales for

the quarter was led by higher Ophthalmology & Cardiology sub‐segments of DF

segment. US sales grew from Rs 50 mn in Q4fY16 to Rs 450 mn (INSL est. Rs

600mn).Topline growth is a miss on our estimates due to slower ramp up in US

business & less than expected growth in DF which was dragged by Derma sub‐

segment.

Gross margin improved 229 bps y‐y to 79.8% (79.3% in Q3FY17) due to superior

product mix and higher contribution of US sales. However, EBITDA margin decreased

104 bps y‐y to 30.8%. This is largely due to increase other expenses & R&D spent.

R&D spent for the quarter was Rs 390 mn (8.6% of net sales) v/s Rs 360 mn in

Q4FY16 (8.5% of net sales).

AJP is amidst expansion of capacities for US & other markets. Additional capacity

resulted in 66% increase in depreciation charge & despite almost doubling of other

income adj net profit increased by only 4.6% y‐y. Tax rate for the quarter was higher

by 196 bps y‐y at 20.8% v/s 18.8% in Q4FY16.

DF segment grew 12.5% y‐y for the quarter:

DF sales came in at Rs 1.4bn, up 12.5% y‐y (down 10% q‐q) impacted by

demonetization. The y‐y growth in DF segment is driven by cardiology and

Daljeet S. Kohli ophthalmology segment both growing at 18% while Derma & pain management sub‐
Head of Research segments showed flat performance with no growth.
Tel: +91 22 62406211




Q4FY17 Result Update | Ajanta Pharma Ltd.
Emerging market sales decline 8% y‐y. Emerging market sales de‐grew by 8% y‐y to
Rs2.7bn for the quarter. Africa sales de‐grew by 23.8% y‐y and Asia sales grew by
15.2% y‐y for the quarter. De‐growth in Africa sales is due to no new orders for anti‐
malaria products.
US sales picking up on the back of new product approval and increased traction in
existing products: Currently. AJP made sales of Rs 450 mn in Q4FY17 v/s Rs 50 mn in
Q4FY16 & Rs 590 mn in Q3FY17. We had expected sales of Rs 600 mn in Q4FY17 on
the basis of no new product launched in the said quarter but market share of existing
one to be maintained. However sequentially there is a decline of ~24% which implies
that competition at both pricing as well as market share is stiff. We expect US sales
to ramp up further from Rs 1850 mn in FY17 to Rs 3012 in FY18E & Rs 5001 in FY19E.

FY17 full year performance
Sales for fY17 were at Rs 19.3bn, up ~12% y‐y, for the quarter. The y‐y growth in
sales was led by higher Cardiology supported by all other divisions barring
institutional business. US sales grew from Rs 140 mn in FY16 to Rs 1850 mn in FY17.
Gross margin for the year improved 251 bps y‐y to 78.5% (76% in FY16) due to
superior product mix and higher contribution of US sales. However, EBITDA margin
decreased 62 bps y‐y to 32.1%. This is largely due to increase in other expenses &
R&D spent. R&D spent for the year Rs 1530 mn (7.9% of net sales) v/s Rs 1060 mn in
FY16 (6.1% of net sales).
Operationalizing new capacity resulted in 38% increase in depreciation charge. On
back of lower tax rate of 21.8% v/s 25.6% in previous year Adj net profit increased by
21.9% y‐y.

DF segment grew 12.5% y‐y in FY17:
DF sales came in at Rs 6.14bn, up 11.8% y‐y impacted by issues like NELM, price
controls, ban on fixed dosage combinations & demonetization. The y‐y growth in DF
segment is driven by cardiology supported by all other divisions except institution
business. We expect AJP to deliver ~15% y‐y growth in DF in both FY18E & FY19E
driven by new product launches, increased market share in existing products and
improved productivity.

Anti‐malaria business is critical for emerging market sales:
Emerging market sales de‐grew by 2.6% y‐y to Rs 11.34 bn in FY17. Africa sales grew
by only 3% y‐y and Asia sales de‐grew by 9.3% y‐y in the said period. Africa sales are
impacted due to no new orders for anti‐malaria products (no new tenders by Global
Fund). With 1191 products registrations in Africa in various therapies like Anti
malaria, Multi Vitamins, Cardio, Antibiotic, and Pain etc. & 361 strength of field
force Africa we believe the growth from this region can rebound. In Asia AJP have
359 registrations along with 352 field force. We expect AJP to maintain momentum
of sales in emerging market. We have built in almost flat growth in EM sales in our
estimates for FY18E & FY19E.


US sales picking up on the back of new product approval and increased traction
in existing products:
Currently AJP has final approval for 17 ANDAs (15 final approvals & 2 tentative
approval) while it has filed for 8 in FY17. The management intends to file 12‐15 in
FY18E. Currently the company has 15 applications pending for approval.
AJP had ~13 fold increase in sales in US on back of various approvals. Going forward
we believe US sales will be the key growth driver for the company. We expect US
sales to ramp up further from Rs 1850 mn in FY17 to Rs 3144 in FY18E & Rs 5102 in
FY19E.

Valuation:
We remain positive on AJP over robust ANDA pipeline, less regulatory risk, sustained
outperformance in DF and increased R&D effort for regulated market. At CMP of Rs
1640, the stock is trading at 25x FY18E EPS of 66.3 and 21x FY19E EPS of Rs 79.6. We
have HOLD rating with price target of Rs 1751, based on 21x FY19E earnings
(unchanged).

Quick Financials
Estimates
FY18E FY19E
Sales 21,902 26,510
EBITDA 7,348 9,080
EBITDA Margin (%) 33.6 34.3
Adjusted PAT 5,858 7,032
EPS (Rs) 66.3 79.6

Quarterly Results Summary
Consolidated nos (According to Ind As)
Q4FY17 Q4FY16 y‐o‐y (%) Q3FY17 Q‐o‐Q(%) FY17 A/E FY16 y‐o‐y (%)
Net Sales 4,561 4,241 7.6 5,150 (11.4) 19,325 17,269 11.9
Consumption of raw material 923 955 (3.4) 1,064 (13.3) 4,146 4,138 0.2
Employee Cost 755 688 9.7 774 (2.5) 2,954 2,566 15.1
Other Expenditure 1,477 1,245 18.6 1,713 (13.8) 6,026 4,918 22.5
Total Expenditure 3,154 2,889 9.2 3,551 (11.2) 13,126 11,623 12.9
EBITDA 1,407 1,352 4.1 1,599 (12.0) 6,198 5,646 9.8
Depreciation & Amortization 189 114 65.7 153 23.7 612 444 37.8
EBIT 1,218 1,238 (1.6) 1,446 (15.8) 5,586 5,201 7.4
Other Income 231 116 99.3 272 (15.1) 929 437 112.8
Interest 9 11 (20.5) 8 8.5 35 49 (28.6)
Pre‐tax Profit 1,440 1,343 7.2 1,710 (15.8) 6,480 5,589 16.0
Tax 300 253 18.4 385 (22.1) 1,413 1,433 (1.4)
Adj Net Profit 1,140 1,090 4.6 1,325 (13.9) 5,067 4,156 21.9
Other Comp inc/EOI (10) 12 NA (9) ‐ (25) 54 (147.3)
Net Profit Reported 1,131 1,101 2.7 1,316 (14.1) 5,042 4,210 19.8
Adj EPS (Rs) 13.0 12.4 4.6 15.1 (13.9) 57.6 47.2 21.9
Equity shares (mn) 88 88 ‐ 88 ‐ 88 88 ‐


Key Ratios
Q4FY17 Q4FY16 bps Q3FY17 bps FY17 A/E FY16 bps
Gross margins (%) 79.8 77.5 229 79.3 44 78.5 76.0 251
EBITDA margin (%) 30.8 31.9 (104) 31.0 (20) 32.1 32.7 (62)
Net Margin (%) 25.0 25.7 (70) 25.7 (73) 26.2 24.1 215
Material cost/Net Sales (%) 20.2 22.5 (229) 20.7 (44) 21.5 24.0 (251)
Employee Cost/ Net Sales (%) 16.6 16.2 32 15.0 152 15.3 14.9 43
Other Expenditure/ Net Sales (%) 32.4 29.4 301 33.3 (88) 31.2 28.5 270
Tax Rate (%) 20.8 18.8 196 22.5 (168) 21.8 25.6 (383)

Sales composition
Rs mn Q4FY17 Q4FY16 y‐o‐y (%) Q3FY17 Q‐o‐Q(%) FY17 A/E FY16 y‐o‐y (%)
Domestic formulation 1,396 1,241 12.5 1,540 (9.3) 6,137 5,491 11.8
‐ Ophthalmology 356 301 18.2 370 (3.8) 1,536 1,375 11.7
‐ Dermatology 310 310 ‐ 380 (18.4) 1,420 1,250 13.6
‐ Cardiology 570 480 18.8 630 (9.5) 2,520 2,060 22.3
‐ Institution 70 60 16.7 50 40.0 210 350 (40.0)
‐ Pain mgmt +Others 90 90 ‐ 110 (18.2) 465 400 16.3
Emerging market 2,715 2,950 (7.9) 3,020 (10.1) 11,339 11,641 (2.6)
‐ Africa 1,325 1,740 (23.8) 2,110 (37.2) 7,126 6,922 3.0
‐ Asia 1,370 1,190 15.2 900 52.2 4,180 4,610 (9.3)
‐ Others 20 20 ‐ 10 100.0 40 100 (60.0)
Regulated market 450 50 800.0 590 (23.7) 1,850 140 1,221.4
Total net sales 4,561 4,241 7.6 5,150 (11.4) 19,325 17,272 11.9


Financial Statements (Consolidated)
Income statement
Y E March (Rs m) FY15 FY16 FY17 A/E FY18E FY19E
Net sales 14,460 17,269 19,325 21,902 26,510
Growth % 22.7% 19.4% 11.9% 13.3% 21.0%
Expenditure
Material Cost 3,654 4,138 4,146 5,300 6,362
Employee cost 2,006 2,566 2,954 3,231 3,778
Other expenses 4,023 4,918 6,026 6,023 7,290
EBITDA 4,777 5,646 6,198 7,348 9,080
Growth % 41.0% 18.2% 9.8% 18.5% 23.6%
EBITDA Margin % 33.0% 32.7% 32.1% 33.6% 34.3%
Depreciation 516 444 612 628 801
EBIT 4,260 5,201 5,586 6,720 8,279
EBIT Margin % 32.1% 32.4% 33.5% 35.7% 36.1%
Other Income 444 437 929 1,096 1,293
Interest 59 49 35 5 5
PBT 4,645 5,589 6,480 7,811 9,567
Tax 1,462 1,433 1,413 1,953 2,535
Effective tax rate % 31.5% 25.6% 21.8% 25.0% 26.5%
Forex gain/(Loss) ‐ ‐ ‐ ‐ ‐
Minority Interest ‐ ‐ ‐ ‐ ‐
Adjusted PAT 3,183 4,156 5,067 5,858 7,032
Growth% 36.1% 30.6% 21.9% 15.6% 20.0%
PAT margin % 22.0% 24.1% 26.2% 26.7% 26.5%
Reported PAT 3,099 4,156 5,067 5,858 7,032
Growth% 36.1% 30.6% 21.9% 15.6% 20.0%




Balance sheet
Share Capital 177 177 177 177 177
Reserves & Surplus 8,234 11,544 15,500 21,108 27,534
8,411 11,721 15,677 21,285 27,711
Non Current Liabilities
Long term borrowings 333 149 10 10 10
Deferred Tax liabilities 152 200 273 273 273
Other long term Liabilities 25 5 1 1 1
Long term Provisions 48 26 32 32 32
557 379 316 316 316
Current Liabilities
Short term borrowings 179 578 55 55 55
Trade payables 1,091 1,456 1,396 1,670 2,005
Other current liabilities 583 567 655 655 655
Short term Provisions 643 114 128 128 219
2,496 2,715 2,234 2,508 2,934
Total 11,464 14,814 18,227 24,109 30,961
Non Current Assets
Net Block 4,583 6,914 9,284 12,570 16,016

Non current investment 53 43 139 139 139
Long term loans and advances 400 ‐ 93 93 93
Other non current assets 93 219 245 245 245
5,129 7,176 9,761 13,046 16,493
Current Assets
Current Investments 195 664 1,816 1,816 1,816
Inventories 1,590 2,046 2,110 2,392 2,895
Sundry Debtors 2,588 3,724 3,218 3,648 4,415
Cash & bank Balances 1,368 550 573 2,548 4,568
Loans & Advances 505 649 637 548 663
Other current Assets 89 7 112 112 112
6,334 7,639 8,466 11,063 14,469
Total 11,464 14,814 18,227 24,109 30,961


Cash Flow
PBT 4,560 5,589 6,480 7,811 9,567
Depreciation 516 444 612 628 801
Interest 59 49 35 5 5
Other non cash charges (64) 139 ‐ ‐ ‐
Changes in working capital (817) (1,235) 274 (347) (960)
Tax (1,461) (1,614) (1,413) (1,953) (2,535)
Cash flow from operations 2,794 3,372 5,987 6,144 6,878
Capital expenditure (1,027) (2,966) (3,285) (3,285) (3,446)
Free Cash Flow 1,767 406 2,702 2,859 3,431
Cash flow from investments (1,584) (2,093) (3,285) (3,285) (3,446)
Equity capital raised
Loans availed or (repaid) (581) 206 ‐ ‐ ‐
Interest paid (59) (49) (35) (5) (5)
Cash flow from Financing (1,051) (1,186) (1,189) (884) (1,412)
Net change in cash 160 93.7 1,514 1,975 2,020
Cash at the beginning of the year 386 545 550 573 2,548
Adjusted cash 823 (90) (1,490) ‐ ‐
Cash at the end of the year 1,368 550 573 2,548 4,568
Key ratios
Y E March FY15 FY16 FY17 A/E FY18E FY19E
Adj EPS (Rs) 36.0 47.0 57.4 66.3 79.6
Cash EPS (Rs) 41.9 52.1 64.3 73.4 88.7
DPS (Rs) 3.6 4.7 13.1 9.9 15.9
ROCE 25.5% 26.1% 24.0% 20.9% 19.7%
ROE 37.8% 35.5% 32.3% 27.5% 25.4%

Inventories Days 40 43 40 40 40

PER (x) 42.0 32.1 26.4 22.8 19.0
P/BV (x) 15.9 11.4 8.5 6.3 4.8
P/CEPS (x) 36.1 29.0 23.5 20.6 17.1
EV/EBITDA (x) 27.8 23.7 21.5 17.8 14.2
Dividend Yield % 0.2% 0.3% 0.9% 0.7% 1.1%

m cap/sales (x) 9.2 7.7 6.9 6.1 5.0
net debt/equity (x) 0.1 0.1 0.0 0.0 0.0
net debt/ebitda (x) ‐0.2 0.0 ‐0.1 ‐0.3 ‐0.5


Alembic Pharma
New launches in US remain critical for growth. Q4FY17 results were in‐

line with our estimates.
New launches in US remain critical for growth. Q4FY17 results were in‐line
Current Previous with our estimates. We expect FY18E to remain soft: Crucial filings for US to
CMP : Rs 600 start in H2FY18. Maintain BUY rating with target price of 746.
Rating : BUY Rating : BUY
Alembic Pharmaceuticals (ALPM) financial performance of 4QFY17 was in‐line
Target : Rs 746 Target : Rs 734 with our estimates. ALPM launched two new products in US taking launch
(NR‐Not Rated)
tally to 3 in FY17 v/s guidance of 6‐7 launches given at the beginning of the
STOCK INFO
year. R&D efforts have been stepped up substantially with R&D expense at
INDEX
BSE 533573 15% of net sales. Management guided for elevated R&D expenses for FY18E
NSE APLLTD also as it prepares for more aggressive fillings & new capacities come up at
Bloomberg ALPM IN various sites. Domestic Formulation (DF) growth remained challenged due to
Reuters ALEM.NS
demonetization. Lower revenue coupled with high R&D expense & employee
Sector Pharma
Face Value (Rs) 2 cost resulted in 389 bps q‐q decline in EBITDA margin. Further due to lower tax
Equity Capital (Rs mn) 377 rate v/s MAT rate in previous quarters Adj PAT grew ~14% Y‐y & 13% q‐q.
Mkt Cap (Rs mn) 114,900
52w H/L (Rs) 709 / 515 In our earlier notes we had mentioned that new product launches in US are
Avg Daily Vol (BSE+NSE) 129,879 most critical for the company to offset loss of gAbilify business. The

management intended to launch at least 6‐8 products in US in FY17 but
SHAREHOLDING PATTERN %
(as on Mar, 2017)
unfortunately, it has been able to launch only 3 new products in US in FY17. In
Promoters 72.68 the post Q4FY17 results concall the management has guided for launch of 8‐10
Public & Others 27.32 products in FY18E. ALPM has been spending on building 3 facilities (Onco,

STOCK PERFORMANCE(%) 3m 6m 12m general injectable & derma products) which instill confidence about long term

ALPM IN Equity 9.1 (9.8) 2.0 strong growth trajectory of the company. However these facilities will start
SENSEX 5.9 9.0 18.5 contributing to financials only after 2019. Till then launches in US will be
Source: Bloomberg, IndiaNivesh Research critical for growth.

ALPM IN Equity v/s SENSEX We remain positive on ALPM on the back of sharp increase in R&D spent
towards developing molecules in oncology and derma space. Also, ALPM has
used JV strategy to make‐up for the skills required for new product
development in derma segment as well as reduce time required to
commercialize the same. ALPM is simultaneously spending on capex to
support commercial manufacturing post regulatory approval At CMP of Rs
600, the stock is trading at 22x FY18E EPS of 27.1 and 17.7x FY19E EPS of

Source: Bloomberg, IndiaNivesh Research Rs33.9. In view of likely muted performance over next 1 year the stock may

Daljeet S. Kohli languish around this level. We maintain our target PE multiple of 22x and roll
Head of Research forward valuation to FY19E to arrive at target price of Rs 746 (previous target
Tel: +91 22 62406211 was Rs 734). We maintain BUY rating on the stock.

Rs.mn Q4FY17 Q4FY16 Q3FY17 Y‐y (%) Q‐q (%) INSPL Est. Variance (%)
Sales 7,414 6,097 7,770 21.6 (4.6) 7,411 0.0
EBIDTA 1,346 1,344 1,454 0.1 (7.4) 1,408 (4.4)
Adjusted PAT 953 836 844 14.1 13.0 895 6.5
Reported PAT 925 841 854 10.1 8.3 891 3.8



Q4FY17 Result Update | Alembic Pharma

Quarterly performance
ALPM recorded sales at Rs7.4bn grew by 21.6% y‐y for the quarter. The growth was
primarily driven by international generics sales, up 44% y‐y, and API sales, up 8.5% y‐
y, for the quarter. However, growth in international generics slipped on sequential
basis in line with our expectation. ALPM has launched 2 new products in this quarter
taking total tally to 3 new products in FY17. Domestic formulation sale was a
disappointment, recording growth of only 6% y‐y (decline of 3% in q‐q).
Demonetization continued to impact DF negatively. Management sounded cautious
about growth in DF for FY18 mainly due to GST implementation.
ALPM delivered gross margin of 73% for the quarter v/s 70.7% in Q4FY16. The sharp
fall in margins is due to very high margin last year because of limited competition
product (gAbilify). However, sequentially the company has witnessed 62 bps decline
in gross margin. Due to higher employee costs & elevated R&D expenses EBITDA
declined 389 bps y‐y (down 56bps q‐q). R&D spent was Rs1.1bn for the quarter.
Adjusted PAT increased by 14% y‐y to Rs953 mn for the quarter.

FY17 performance & future outlook
ALPM recorded sales at Rs31.35bn showing de‐growth of 1% y‐y. US business was
impacted due to high base of last year, few new launches in US & pricing pressure for
all generics in US. Similarly DF business was impacted by one or the other factors
throughout the year. In H1FY17 the company’s DF was impacted by price control
issues, DPCO/NELM, ban on fixed dosage combination (FDC) & later in H2FY17
demonetization impacted. For full year FY17 international generics de‐grew by 15%
out of which majority is due to loss of market share & pricing power in gAbilify. DF
grew by only 6.7% in FY17 y‐y against historical average of double digits due to
aforesaid reasons. API sales growth was abnormal in FY17 & may not sustain in
future. API sales grew 22% y‐y.
Management believes FY18E to be a year of consolidation with US sales growth
coming from launch of 8‐10 new products & DF to remain challenged due to likely
disruption arising from GST implementation.
ALPM delivered gross margin of 72.6% for FY17 v/s 75.3% in FY16. The fall in margins
is due to change in product mix. Due to higher employee costs, other expenses &
elevated R&D expenses EBITDA declined 1219 bps y‐y to 19.6%. R&D spent for FY17
was Rs4.27bn v/s Rs 3.17 bn in FY16. In view of continued thrust on new filings &
launches in regulated markets management expects R&D expenses to remain
elevated in FY18E too. They have guided for R&D expense of Rs 5bn in FY18E.
Adj PAT declined 44% y‐y in line with ~39% decline in EBITDA.

Concall highlights
Till date ALPM had filed cumulatively for 95 products with USFDA out of which it has
received approvals for 52 (including 6 tentative) & waiting for remaining 43.
According to management out of these 43, ~40% are para 4 opportunities.
ALPM has launched Pristique in US in partnership. These sales will reflect in Q1FY18E
as ALPM reports partner sales with 1 quarter lag. According to management their
partner has garnered ~15% market share for this product. However the product is

likely to witness significant competition in future as currently 6‐7 players have got
approvals & probably 3‐4 more will come.
Work on all 3 new capacities for Oral solids, injectables & oncology is progressing as
per schedule. Management expects to start filing for products from some of these
facilities from H2FY18E post the completion of site.
ALPM has JV with Orbicular Pharmaceutical technologies (OPT) to co‐develop,
manufacture and commercialize derma products for US market. ALPM earlier guided
that about 10‐15 products developed by OPT are at the filing stage which can be
taken up in H1FY18 once this new facility will be ready. However we expect any
business opportunity from this JV to emerge in FY19‐20.
According to management DF business is likely to hit by GST implementation. Since
there is uncertainty amongst the channel partners regarding applicability & process
of GST implementation, channel partners have reduced stocks from normal levels.
This change in buying behavior (stocking pattern at dealer level) may impact sales for
few months till clarity emerges.
Management guided for capex of Rs 7 bn for FY18E out of which ~Rs 5 bn will be
spent on new facilities while the rest would be for de‐bottlenecking & maintenance
etc.
According to management all the facilities of the company are USFDA compliant as
of date. Kharkhadi facility was last inspected in 2015 & may be due for inspection but
as of now all facilities have EIR implying less regulatory risk.

Valuation:
In our earlier notes we had mentioned that new product launches in US are most
critical for the company to offset loss of gAbilify business. The management intended
to launch at least 6‐8 products in US in FY17 but unfortunately in FY17, it has been
able to launch only 3 new products in US. In the post Q4FY17 results concall the
management has guided for 8‐10 products. ALPM has been spending on building 3
facilities (Onco, general injectable & derma products) which instill confidence about
long term strong growth trajectory of the company. However these facilities will
start contributing to financials only after 2019. Till then launches in US will be critical
for growth.
We remain positive on ALPM on the back of sharp increase in R&D spent towards
developing molecules in oncology and derma space. Also, ALPM has used JV strategy
to make‐up for the skills required for new product development in derma segment
as well as reduce time required to commercialize the same. ALPM is simultaneously
spending on capex to support commercial manufacturing post regulatory approval At
CMP of Rs 600, the stock is trading at 22x FY18E EPS of 27.1 and 17.7x FY19E EPS of
Rs33.9. In view of likely muted performance over next 1 year the stock may languish
around this level. We maintain our target PE multiple of 22x & roll forward valuation
to FY19E to arrive at target price of Rs 746 (previous target was Rs 734). We maintain
BUY rating on the stock.


Quick Financials
Estimates
Rs mn
FY18E FY19E
Sales 35,752 41,345
EBITDA 7,642 9,432
PAT 5,105 6,388
EPS (Rs) 27.1 33.9

Quarterly Results Summary
Consolidated nos (as per IND‐As )
Rs mn Q4FY17 Q4FY16 Y‐o‐Y (%) Q3FY17 Q‐o‐Q (%) FY17 A/E FY16 Y‐o‐Y (%)
Net Sales 7,414 6,097 21.6 7,770 (4.6) 31,346 31,660 (1.0)
Total Income 7,414 6,097 21.6 7,770 (4.6) 31,346 31,660 (1.0)
Consumption of raw material 2,005 1,239 61.8 2,054 (2.4) 8,581 7,811 9.9
Empoyee Cost 1,379 984 40.1 1,305 5.6 5,588 4,729 18.2
R&D Expenses 1,124 1,110 1.2 1,167 (3.7) 4,272 3,166 34.9
Other Expenditure 1,560 1,420 9.9 1,791 (12.9) 6,758 5,887 14.8
Total Expenditure 6,068 4,753 27.7 6,316 (3.9) 25,199 21,593 16.7
EBITDA 1,346 1,344 0.1 1,454 (7.4) 6,147 10,067 (38.9)
Depreciation & Ammortization 218 244 (10.5) 211 3.4 830 722 14.9
EBIT 1,128 1,100 2.5 1,243 (9.3) 5,317 9,345 (43.1)
Interest 18 13 39.2 8 141.3 51 54 (5.7)
Other Income 9 26 (66.0) 2 456.3 25 73 (66.0)
Pre‐tax Profit 1,118 1,113 0.5 1,237 (9.6) 5,291 9,363 (43.5)
Tax 165 278 (40.6) 393 (58.0) 1,222 2,161 (43.5)
Net Profit (adj) 953 836 14.1 844 13.0 4,069 7,202 (43.5)
Other comp income (11) 2 NA 17 NA (59) (6) NA
Net Profit reported 942 838 12.5 861 9.4 4,010 7,196 (44.3)
EPS (Rs) 5.1 4.4 14.1 4.5 13.0 21.6 38.2 (43.5)
O/ Shares 189 189 ‐ 189 ‐ 189 189 ‐
Key Ratios
Q4FY17 Q4FY16 bps (y‐o‐y) Q3FY17 bps (q‐o‐q) FY17 A/E FY16 bps (y‐o‐y)
Gross Margins 73.0 79.7 (672) 73.6 (62) 72.6 75.3 (270)
EBITDA margin 18.2 22.0 (389) 18.7 (56) 19.6 31.8 (1,219)
Net Margin 12.9 13.7 (84) 10.9 200 13.0 22.7 (977)
Material cost/ Net sales 27.0 20.3 672 26.4 62 27.4 24.7 270
Employee Cost/ Net sales 18.6 16.1 246 16.8 180 17.8 14.9 289
R& D Expenses / Net sales 15.2 18.2 (305) 15.0 14 13.6 10.0 363
Other Expenditure/ Net sales 21.0 23.3 (224) 23.0 (200) 21.6 18.6 296
Tax Rate 14.7 24.9 (1,019) 31.8 (1,701) 23.1 23.1 1
Sales Composition
Gross Revenue Q4FY17 Q4FY16 Y‐o‐Y (%) Q3FY17 Q‐o‐Q (%) FY17 A/E FY16 Y‐o‐Y (%)
Formulation 5,590 4,590 21.8 6,099 (8.3) 24,915 26,378 (5.5)
India Branded 2,860 2,690 6.3 3,072 (6.9) 12,556 11,765 6.7
International Generics 2,730 1,900 43.7 3,027 (9.8) 12,359 14,613 (15.4)
API 1,810 1,669 8.4 1,663 8.8 6,398 5,248 21.9

Total 7400 6259 18.2 7762 (4.7) 31313 31626 (1.0)


Financial Statements (Consolidated)
Income statement
Y E March (Rs m) FY14 FY15 FY16 FY17 A/E FY18E FY19E
Net sales 18,607 20,527 31,624 31,309 35,752 41,345
Growth % 22.6% 10.3% 54.1% ‐1.0% 14.2% 15.6%
Expenditure
Raw Material 7,134 7,145 7,811 8,581 10,332 11,783
Employee cost 2,470 3,068 4,729 5,588 5,933 6,433
Other expenses 5,452 6,288 9,053 11,030 11,943 13,796
EBITDA 3,577 4,060 10,067 6,147 7,642 9,432
Growth % 42.0% 13.5% 147.9% ‐38.9% 24.3% 23.4%
EBITDA Margin % 19.2% 19.8% 31.8% 19.6% 21.4% 22.8%
Deprecaition 405 444 722 830 835 918
EBIT 3,172 3,616 9,345 5,317 6,807 8,513
EBIT Margin % 17.0% 17.6% 29.5% 17.0% 19.0% 20.6%
Other Income 32 23 73 25 20 20
Interest 98 18 54 51 20 16
PBT 3,106 3,622 9,363 5,291 6,807 8,517
Tax 751 764 2,161 1,222 1,702 2,129
Effective tax rate % 24.2% 21.1% 23.1% 23.1% 25.0% 25.0%
Extraordinary items ‐ ‐ (6) (59) ‐ ‐
Less: Minority Interest
Adjusted PAT 2,355 2,829 7,196 4,011 5,105 6,388
Growth% 42.5% 20.1% 154.4% ‐44.3% 27.3% 25.1%
PAT margin % 12.7% 13.8% 22.8% 12.8% 14.3% 15.5%
Reported PAT 2,355 2,827 7,202 4,069 5,105 6,388
Growth% 42.5% 20.0% 154.7% ‐43.5% 25.5% 25.1%

Balance sheet
Share Capital 377 377 377 377 377 377
Reserves & Surplus 6,379 8,469 15,628 18,635 20,938 26,368
Net Worth 6,756 8,846 16,005 19,012 21,315 26,745
Non Current Liabilities
Long term borrowing 522 188 ‐ ‐ ‐ ‐
Deferred Tax liabilities 227 314 501 369 369 369
Other Loang Term Liabilities 127 128 131 126 126 126
Long term Provisions 67 94 282 572 572 572
943 724 914 1,067 1,067 1,067
Current Liabilities
Short term borrowings 254 2,197 1,325 802 802 802
Trade payables 2,884 3,109 5,664 5,232 5,093 5,890
Other current liabilities 606 586 525 629 1,665 1,926
Short term provisions 729 949 160 124 1,841 2,316
4,474 6,841 7,674 6,788 9,402 10,934
Total Liabilities 12,173 16,412 24,594 26,867 31,785 38,746
Assets
Net Block 4,176 5,947 8,237 11,957 11,823 13,654
Non Current Investments 34 23 21 502 502 502
Long term laons & Advances 948 1,182 834 501 501 501
Goodwill 353 436 697 697 697
Current Assets
Inventories 3,108 3,828 5,776 6,328 6,367 7,363
Sundry Debtors 2,734 3,612 3,505 3,375 4,898 5,664
Cash & Banak Balances 240 268 4,508 1,737 4,255 7,194
Other Current Assets ‐ ‐ ‐ ‐ ‐ ‐
Loans & Advances 933 1,200 1,277 1,771 2,743 3,172
7,014 8,907 15,066 13,211 18,262 23,392
Total assets 12,173 16,412 24,594 26,867 31,784 38,746


Cash Flow
PBT 3,106 3,591 9,361 5,252 6,807 8,517
Depreciation 405 444 722 830 835 918
Interest 104 38 43 51 20 16
Other non cash charges 189 (36) (192) ‐ ‐ ‐
Changes in working capital (715) (1,625) 1,346 (1,280) 81 (659)
Tax (689) (694) (1,970) (1,222) (1,702) (2,129)
Cash flow fromoperations 2,400 1,717 9,310 3,631 6,042 6,663
Capital expenditure (820) (2,236) (3,036) (2,500) (2,750) (2,750)
Free Cash Flow 1,580 (518) 6,274 1,131 3,292 3,913
Other income 9 22 13 ‐ ‐ ‐
Investments ‐ (342) (81) ‐ ‐ ‐
Cash flow from investments (811) (2,556) (3,105) (2,500) (2,750) (2,750)
Equity capital raised ‐ ‐ ‐ ‐ ‐ ‐
Loans availed or (repaid) (855) 1,572 (1,262) ‐ ‐ ‐
Interest paid (110) (50) (44) (51) (20) (16)
Dividend paid (incl tax) (546) (655) (653) (762) (753) (958)
Others
Cash flow from Financing (1,511) 867 (1,959) (813) (773) (974)
Net change in cash 78 28 4,246 318 2,518 2,939
Cash at the beginning of the year 161 239 268 4,508 1,737 4,255
Adjustments ‐ ‐ (6) (3,089) ‐ ‐
Cash at the end of the year 239 268 4,508 1,737 4,255 7,194

Key ratios
Y E March FY14 FY15 FY16 FY17 A/E FY18E FY19E
EPS (Rs) Core 12.5 15.0 38.2 21.6 27.1 33.9
EPS Reported 12.5 15.0 38.2 21.3 27.1 33.9
Cash EPS (Rs) 14.6 17.4 42.0 26.0 31.5 38.8
DPS (Rs) 2.2 2.7 1.1 4.0 4.0 5.1
BVPS (Rs) 65 87 130 143 169 206

ROCE 26.2% 22.0% 37.3% 18.5% 19.3% 19.7%
ROE 30.0% 29.1% 43.4% 21.6% 23.3% 23.5%

Inventories Days 65 65 65 65 65 65
Sundry Debtors Days 50 50 50 50 50 50
Loans & Advances Days 28 28 28 28 28 28
Trades Payable Days 52 52 52 52 52 52

PER (x) 48.4 40.3 15.8 28.0 22.3 17.9
P/BV (x) 9.4 6.9 4.6 4.2 3.6 2.9
EV/EBITDA (x) 32.1 28.7 11.1 18.6 14.6 11.4

Dividend Yield % 0.4% 0.4% 0.2% 0.7% 0.7% 0.8%
m cap/sales (x) 6.1 5.6 3.6 3.6 3.2 2.8
net debt/equity (x) 0.2 0.3 0.1 0.1 0.1 0.1
net debt/ebitda (x) 0.3 0.7 (0.2) 0.0 (0.3) (0.6)



Exide Industries Ltd.
Inline with estimates, downgrading to HOLD owing to recent run‐up

with a TP of Rs. 234
Exide Industries reported Q4FY17 in line with our estimates. Revenue increased

Current Previous by 11% YoY and 14% QoQ to Rs. 19.8 bn (In line with our estimate of Rs. 19.5 bn).
CMP : Rs 236 EBITDA margin contracted 157 bps YoY to 13.3% vs our expectation of 12.7%.
Rating : HOLD Rating : BUY Reported net profit stood at Rs. 1.65 bn vs our expectation of Rs. 1.63 bn.
Management indicated that Q4FY17 growth was led by growth in UPS and home
Target : Rs 234 Target : Rs 226
UPS batteries.
(NR‐Not Rated)

STOCK INFO Rs. mn Q4FY17 Q3FY17 Q4FY16 Q‐o‐Q % Y‐o‐Y % INSPL Q4FY17E Variance(%)
Net Revenue 19,757 17,268 17,711 14 11 19,485 1.4
INDEX EBIDTA 2,618 2,271 2,663 15 ‐2 2,472 5.9
BSE 500086 PAT 1,648 1,515 1,752 9 ‐6 1,628 1.2
NSE EXIDEIND Source: Company Filings; IndiaNivesh Research
Bloomberg EXID IN
Reuters EXID.NS
Sector Auto  Gross margin during the quarter dipped 170 bps on YoY basis owing to increase in
Face Value (Rs) 1 led prices during in Apr‐Dec period which impacts the performance with a lag.
Equity Capital (Rs mn) 850
 The management indicated that rising lead prices continues to be a major
Mkt Cap (Rs mn) 188,955
52w H/L (Rs) 241 / 136 concern and is focusing on cost control and technology upgradation as a strategy
Avg Daily Vol (BSE+NSE) 2,262,248 to improve the bottom line. Automation in the newer plant is expected to help
them reduce wastage due to human error and reduction in unfinished inventory.
SHAREHOLDING PATTERN %
(as on Mar, 2017)  At CMP of Rs. 236 Exide trades at 22x standalone FY19 EPS. We downgrade the
Promoters 45.99 rating to HOLD with a target price of Rs. 234 (18x FY19E EPS + insurance business
Public & Others 54.01 value of Rs. 35/share).

STOCK PERFORMANCE(%) 3m 6m 12m Lead prices have jumped significantly during FY17

Exide 6.3 15.3 53.8
SENSEX 5.9 9.0 18.5 180
Source: Bloomberg, IndiaNivesh Research

Exide v/s SENSEX 160
140
120
100
Jun‐16
Jul‐16
Aug‐16
Oct‐16
Mar‐17
Apr‐17
May‐16
Sep‐16
Nov‐16
Dec‐16
Jan‐17
Feb‐17
Source: Bloomberg, IndiaNivesh Research

Daljeet S. Kohli
Head of Research
Tel: +91 22 62406211 Source:, IndiaNivesh Research

Rajiv Bharati
Research Analyst

Tel: 022‐62406455
rajiv.bharati@indianivesh.in

Sriram R
Research Associate
Tel:+91 22 62406454 Financial Performance
YE March EBITDA
r.sriram@indianivesh.in (Rs Mn)
Net Sales EBITDA Adj.PAT Adj.EPS (Rs)
Margin
RoE(%) Adj.P/E(x) EV / EBITDA (x)

FY15 68,655 9,077 5,459 6.4 13.2 14.0 36.8 22.0
FY16 68,638 10,262 6,246 7.3 15.0 14.6 32.2 18.7
FY17 76,424 10,965 6,936 8.2 14.3 14.6 29.0 17.6
FY18E 84,321 12,531 7,913 9.3 14.9 15.1 25.4 15.3
FY19E 95,060 14,748 9,388 11.0 15.5 16.0 21.4 12.7


Q4FY17 Result Update | Exide Industries Ltd.
Chapt er Title
Quick Fundamentals (Rs. Mn) Q4FY17 Q3FY17 Q4FY16 QoQ % YoY %

Net Revenue 19,636 17,253 17,644 14 11
Other Operating Income 121 15 67 702 81
Total Income 19,757 17,268 17,711 14 12
Cost of Revenues 17,139 14,996 14,989 14 14
Raw Materi als 12,368 10,376 10,766 19 15
Other Expenditure 3,468 3,339 3,051 4 14
Employee Expenses 1,303 1,282 1,172 2 11
EBIDTA 2,618 2,271 2,663 15 ‐2
Depreciation 544 522 439 4 24
EBIT 2,073 1,749 2,223 19 ‐7
Interest Expense ‐ 21 14 NA
Other i ncome 215 350 226 ‐39 ‐5
PBT 2,289 2,079 2,436 10 ‐6
Provi sion for taxati on 641 564 684 14 ‐6
PAT 1,648 1,515 1,752 9 ‐6
Adjusted PAT 1,648 1,515 1,752 9 ‐6
EPS (RS.) 1.94 1.78 2.06 9 ‐6
Margin % Basis Points (BPS)
EBITDA 13.3 13.2 15.0 10 ‐178
EBIT 10.5 10.1 12.6 36 ‐206
PBT 11.6 12.0 13.8 ‐45 ‐217
PAT 8.3 8.8 9.9 ‐43 ‐155
Source: Company Filings; IndiaNivesh Research

 Raw material cost (as a % on sales) increased 197/285 bps YoY/QoQ on account
of rise in lead prices.
Cost Analysis (% of Revenue) Q4FY17 Q3FY17 Q4FY16 bps QoQ bps YoY
Raw Materi als (Adj.) 63.0% 60.1% 61.0% 285 197
Employee Expenses 6.6% 7.4% 6.6% ‐79 ‐1
Other Expenses 17.7% 19.4% 17.3% ‐169 37

 GST is expected to be a game changer for industrial battery segment where
there is a large unorganized presence. Exide having incremental capacity, owing
to its Rs. 14 bn capex of which Rs. 7 bn is already commissioned should help it
capture the incremental demand. Additionally, the price differential between
batteries from Exide and Amara Raja has narrowed leaving little room for price
deterioration.
 The impact of the new technology implementation would kick in FY18 where it
targets a 16% EBITDA Margin; we have built in 60 bps improvement in EBITDA
margin in FY18 and FY19 each at 14.9% and 15.5% respectively.


Income Statement (Standalone)

Y E March (Rs m) FY15 FY16 FY17 FY18E FY19E
Net sales 68,655 68,638 76,424 84,321 95,060
Growth (%) 15 0 11 10 13
Operating expenses (59,579) (58,376) (65,459) (71,790) (80,312)
Operating profit 9,077 10,262 10,965 12,531 14,748
Other operating income 0 0 0 0 0
EBITDA 9,077 10,262 10,965 12,531 14,748
Growth (%) (3.1) 13.1 6.9 14.3 17.7
Depreciation (1,395) (1,579) (2,063) (2,305) (2,630)
Other income 320 416 898 1,078 1,294
EBIT 8,002 9,098 9,800 11,304 13,412
Finance cost (17) (17) (43) 0 0
Exceptional item 0 0 0 0 0
Profit before tax 7,985 9,083 9,757 11,304 13,412
Tax (current + deferred) (2,526) (2,837) (2,821) (3,391) (4,023)
Profit / (Loss) for the period 5,459 6,246 6,936 7,913 9,388
Associates, Min Int 0 0 0 0 0
Reported net profit 5,459 6,246 6,936 7,913 9,388
Extraordinary item 0 0 0 0 0
Adjusted net profit 5,459 6,246 6,936 7,913 9,388
Growth (%) (10) 14 11 14 19
Balance Sheet (Standalone)
Y E March (Rs m ) FY15 FY16 FY17 FY18E FY19E
Share capital 850 850 850 850 850
Reserves & surplus 39,696 44,264 48,786 54,216 61,122
Net Worth 40,546 45,114 49,636 55,066 61,972
Minority Interest 0 0 0 0 0
Total Liabilities 13,480 16,270 18,120 18,090 20,440
Non‐current liabilities 1,589 3,256 3,773 4,017 4,289
Long‐term borrowings 0 0 0 0 0
Deferred tax liabilities 1,259 1,270 1,552 1,552 1,552
Other Long term liabilities 51 0 0 0 0
Long term provisions 279 1,987 2,221 2,466 2,737
Current Liabilities 11,891 13,013 14,347 14,073 16,151
Short term borrowings 176 1,025 1,702 0 0
Trade payables 6,479 7,499 7,737 8,612 9,920
Other current Liabilities 2,689 4,134 4,483 4,960 5,639
Short term provisions 2,548 355 425 502 592
Total Liabilities and Equity 54,026 61,384 67,756 73,157 82,411

Non Current Assets 30,754 32,938 35,992 38,687 41,057
Net Block 22,603 26,937 32,119 37,509 42,249
Goodwill 0 0 0 0 0
Non‐current Investments 17,550 18,426 19,118 19,118 19,118
Long‐term loans and advances 1,288 0 0 0 0
Deferred tax Assets 0 0 0 0 0
Other non current Assets 13 0 0 0 0
Current Assets 23,272 28,446 31,764 34,470 41,355
Inventories 15,228 11,335 15,274 16,560 18,613
Sundry Debtors 5,550 6,039 6,217 7,100 7,946
Cash & Bank Balances 298 739 196 (2,197) (1,752)
Other current Assets 0 637 674 655 664
Loans & Advances 790 417 350 580 581
Current Investments 1,407 9,279 9,055 11,771 15,303
Total (Assets) 54,026 61,384 67,756 73,157 82,411


Cash Flow Statement (Standalone)

Y E March (Rs m) FY15 FY16 FY17 FY18E FY19E
Profit before tax 7,985 9,083 9,757 11,304 13,412
Depreciation 1,395 1,579 2,063 2,305 2,630
Change in working capital (3,809) 6,406 (3,194) (709) (560)
Total tax paid (2,318) (2,827) (2,539) (3,391) (4,023)
Others 17 17 43 0 0
Cash flow from operations (a) 3,270 14,258 6,131 9,509 11,458
Capital expenditure (2,809) (4,188) (4,425) (5,000) (5,000)
Change in investments 713 (8,748) (469) (2,716) (3,531)
Others (1) 13 0 0 0
Cash flow from investing (b) (2,096) (12,923) (4,893) (7,716) (8,531)
Free cash flow (a+capex) 461 10,070 1,707 4,509 6,458
Equity raised/(repaid) 0 0 0 0 0
Debt raised/(repaid) 176 850 677 (1,702) 0
Dividend (incl. tax) (2,185) (2,383) (2,383) (2,483) (2,483)
Others (59) 690 (6) 0 0
Cash flow from financing (c) (2,068) (895) (1,713) (4,185) (2,483)
Net change in cash (a+b+c) (894) 440 (474) (2,392) 444
Reconciliation of Other balances 0 0 (68) 0 0
Cash as per Balance Sheet 298 739 196 (2,197) (1,752)

Key Ratios (Standalone )
Y E March FY15 FY16 FY17 FY18E FY19E
Adjusted EPS (Rs) 6.4 7.3 8.2 9.3 11.0
Growth (10.5) 14.4 11.1 14.1 18.6
Dividend/share (Rs) 2.2 2.4 2.4 2.5 2.5
Dividend payout ratio 34.3 32.7 29.4 26.9 22.6
EBITDA margin 13.2 15.0 14.3 14.9 15.5
EBIT margin 11.7 13.3 12.8 13.4 14.1
Net Margin 8.0 9.1 9.1 9.4 9.9
Tax rate (%) 31.6 31.2 28.9 30.0 30.0
Debt/Equity(x) 0.0 0.0 0.0 0.0 0.0
Inventory Days 81 60 73 72 71
Sundry Debtor Days 30 32 30 31 31
Trade Payable Days 34 40 37 37 38
Du Pont Analysis ‐ ROE
Net margin 8.0 9.1 9.1 9.4 9.9
Asset turnover (x) 1.3 1.2 1.2 1.2 1.2
Leverage factor (x) 1.3 1.3 1.4 1.3 1.3
ROE(%) 14.0 14.6 14.6 15.1 16.0
RoCE (%) 19.8 19.8 18.8 19.8 21.4
Valuation (x)
PER 36.8 32.2 29.0 25.4 21.4
PCE 29.3 25.7 22.3 19.7 16.7
Price/Book 5.0 4.5 4.0 3.6 3.2
EV/EBITDA 22.0 18.7 17.6 15.3 12.7


Daljeet S. Kohli Monthly Auto Numbers | April 2017
Head of Research
Tel: +91 22 66188826 Force Motors Ltd.: Total volumes down 16% YoY; maintain BUY with a
daljeet.kohli@indianivesh.in target price of Rs. 4698
Change Change Change
Sriram R Segment Apr‐17 Apr‐16 Mar‐17 YTD FY17 YTD FY16
YoY MoM YoY
Research Associate SCV & LCV 1,201 1,358 ‐12% 2,801 ‐57% 1,201 1,358 ‐12%
SCV & LCV 1,048 1,155 ‐9% 2,575
Tel: +91 22 61151621 Domestic ‐59%
1,048 1,155
‐9%
r.sriram@indianivesh.in SCV & LCV Export 153 203 ‐25% 226 ‐32% 153 203 ‐25%
UV, SUV & Tractor 616 806 ‐24% 1,561 ‐61% 616 806 ‐24%
UV, SUV & Tractor 616 797 ‐23% 1,554
Rajiv Bharati 616 797
Domestic ‐60% ‐23%
Research Analyst UV, SUV & Tractor
0 9 ‐100%
Export 0 9 7 ‐100%
Tel: +91 22 66188818 Total 1,817 2,164 ‐16% 4,362 ‐58% 1,817 2,164 ‐16%
rajiv.bharati@indianivesh.in Domestic 1,664 1,952 ‐15% 4,129 ‐60% 1,664 1,952 ‐15%
Exports 153 212 ‐28% 233 ‐34% 153 212 ‐28%

 SCV and LCV segment faced pressure in the month of April 17. Volumes were down
12% YoY. The company recorded the lowest volume this month after November 2016
where it sold 859 units.
 UV & Tractor sales volume were weak this month. Volumes were down 24% YoY. The
company recorded the lowest volume in this segment since January 16.

UV, SUV and Tractors SCV and LCV
2,500
3,500
1,981
2,801
2,782
2,000
2,800
1,561
1,528
1,489
1,230
1,217
1,918
1,500
1,147
1,832
1,120
1,796
1,093
1,060
1,035
2,100
1,704
1,001
1,607
1,544
1,535
1,446
1,402
1,358
806
1,309
1,293
785
1,000
763
1,201
616
1,400
859
500
700
0
Jul‐16
Jan‐16
Feb‐16
Mar‐16
Apr‐16
May‐16
Jun‐16
Aug‐16
Sep‐16
Oct‐16
Nov‐16
Dec‐16
Jan‐17
Feb‐17
Mar‐17
Apr‐17
0
Jan‐16
Feb‐16
Mar‐16
Apr‐16
May‐16
Jun‐16
Jul‐16
Aug‐16
Sep‐16
Oct‐16
Nov‐16
Dec‐16
Jan‐17
Feb‐17
Mar‐17
Apr‐17
Total Sales
Total Sales

Source: Company filings, IndiaNivesh Research Source: Company filings, IndiaNivesh Research


Valuation Table
M
EBITDA PAT Mcap EBITDA% NPM% CMP Target Price Current Previous
Company Sales P/E(x) cap/Sales(x)
Name FY18e FY18e FY18e FY18e FY18e FY18e FY18e Rs. Rs. Recom. Recom.
(Rs.
(Rs. Mn) (Rs. Mn)
(Rs. Mn) Mn)
Atul Auto 5,202 707 441 9,353 21.2 1.8 13.6 8.5 426 400 HOLD HOLD
Bajaj Auto 2,61,816 58,647 45,988 8,51,477 18.5 3.3 22.4 17.6 2943 3020 HOLD HOLD
Ashok leyland* 2,38,280 27,495 15,826 2,36,919 15.0 1.0 11.5 6.6 83 NA NA NA
Force Motors 38,258 3,284 1,947 59,475 30.5 1.6 8.6 5.1 4563 4698 BUY BUY
Eicher Motors* 1,51,483 26,640 21,747 7,01,053 32.2 4.6 17.6 14.4 25764 NA NA NA

Hero MotoCorp 3,17,984 54,784 17.3 2.1 17.2 12.3 3396 3875 BUY BUY
39,271 6,78,101
M&M 5,31,669 58,484 41,840 8,29,096 19.8 1.6 11.0 7.9 1335 1721 BUY BUY
Maruti Suzuki India 8,00,835 1,30,933 88,499 20,05,751 22.7 2.5 16.3 11.1 6640 7375 BUY HOLD
Tata Motors 29,31,859 3,52,253 67,716 13,96,072 20.6 0.5 12.0 2.3 437 523 HOLD HOLD
TVS Motor Company 1,51,211 12,173 6,914 2,36,237 34.2 1.6 8.1 4.6 497 371 SELL SELL
SML Isuzu* 16,044 1,445 902 19,175 21.3 1.2 9.0 5.6 1325 NA NA NA
Escorts Ltd* 47,653 4,380 2,855 69,709 24.4 1.5 9.2 6.0 569 NA NA NA
*Consensus Estimates


Results Today

 Apcotex Industries Ltd.
 NIIT Technologies Ltd.


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This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries,
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particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board
of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading
volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal,
accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever
nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions
expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have
holdings in the stocks mentioned in the document.
This report is based / focused on fundamentals of the Company and forward‐looking statements as such, may not match with a report on a company’s technical analysis report
Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this
report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed in this report: Daljeet S Kohli, Kamal Sahoo, Santosh Yellapu, Rajiv Bharati, Sriram R, Monami Manna and Saptarshi Mukherjee.
Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter:

Disclosure of Interest Statement
1 Details of business activity of IndiaNivesh Securities Limited (INSL) INSL is a Stock Broker registered with BSE, NSE and MCX ‐ SX in all the major segments viz. Cash, F & O and CDS
segments. INSL is also a Depository Participant and registered with both Depository viz. CDSL and NSDL.
Further, INSL is a Registered Portfolio Manager and is registered with SEBI.
2 Details of Disciplinary History of INSL No disciplinary action is / was running / initiated against INSL
3 Details of Associates of INSL Please refer to the important 'Stock Holding Disclosure' report on the IndiaNivesh website (investment
Research Section ‐http://www.indianivesh.in/Research/Holding_Disclosure.aspx?id=10 link). Also, please refer
to the latest update on respective stocks for the disclosure status in respect of those stocks. INSL and its
affiliates may have investment positions in the stocks recommended in this report.
4 Research analyst or INSL or its relatives'/associates' financial interest No (except to the extent of shares held by Research analyst or INSL or its relatives'/associates')
in the subject company and nature of such financial interest
5 Research analyst or INSL or its relatives'/associates' actual/beneficial Please refer to the important 'Stock Holding Disclosure' report on the IndiaNivesh website (investment
ownership of 1% or more in securities of the subject company, at the Research Section ‐ http://www.indianivesh.in/Research/Holding_Disclosure.aspx?id=10 link). Also, please refer
end of the month immediately preceding the date of publication of to the latest update on respective stocks for the disclosure status in respect of those stocks. INSL and its
the document. affiliates may have investment positions in the stocks recommended in this report.
6 Research analyst or INSL or its relatives'/associates' any other material No
conflict of interest at the time of publication of the document
7 Has research analyst or INSL or its associates received any No
compensation from the subject company in the past 12 months
8 Has research analyst or INSL or its associates managed or co‐managed No
public offering of securities for the subject company in the past 12
months
compensation for investment banking or merchant banking or
brokerage services from the subject company in the past 12 months
compensation for products or services other than investment banking
or merchant banking or brokerage services from the subject company
in the past 12 months
compensation or other benefits from the subject company or third
party in connection with the document.
12 Has research analyst served as an officer, director or employee of the No
subject company
13 Has research analyst or INSL engaged in market making activity for the No
subject company
14 Other disclosures No

INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations
expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change,
as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time.
Definitions of ratings
BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
HOLD. We expect this stock to deliver ‐15% to +15% returns over the next 12 months.
SELL. We expect this stock to deliver <‐15% returns over the next 12 months.
Our target prices are on a 12‐month horizon basis.
Other definitions
NR = Not Rated. The investment rating and target price, if any, have been arrived at due to certain circumstances not in control of INSL
CS = Coverage Suspended. INSL has suspended coverage of this company.
UR=Under Review. Such e invest review happens when any developments have already occurred or likely to occur in target company & INSL analyst is waiting for some more information to draw
conclusion on rating/target.
NA = Not Available or Not Applicable. The information is not available for display or is not applicable.
NM = Not Meaningful. The information is not meaningful and is therefore excluded.
Research Analyst has not served as an officer, director or employee of Subject Company
One year Price history of the daily closing price of the securities covered in this note is available at www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock‐quotes.
(Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart)

IndiaNivesh Securities Limited
Research Analyst SEBI Registration No. INH000000511
IndiaNivesh Research 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007.
May 05, 2017
Tel: (022) 66188800 / Fax: (022) 66188899
e‐mail: research@indianivesh.in | Website: www.indianivesh.in

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IndiaNivesh Securities Ltd 5 May 2017 2 of 3

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Tel: +91 22 62406211 Net Sales (Rs. Mn) 7060 6922 6847 2.0% 3.1%

IndiaNivesh Securities Ltd 5 May 2017 2 of 7

IndiaNivesh Securities Ltd 5 May 2017 3 of 7

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STOCK PERFORMANCE(%) 3m 6m 12m general injectable & derma products) which instill confidence about long term

IndiaNivesh Securities Ltd 5 May 2017 2 of 6

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IndiaNivesh Securities Ltd 5 May 2017 6 of 6

Exide Industries reported Q4FY17 in line with our estimates. Revenue increased

STOCK PERFORMANCE(%) 3m 6m 12m Lead prices have jumped significantly during FY17

Quick Fundamentals (Rs. Mn) Q4FY17 Q3FY17 Q4FY16 QoQ % YoY %

IndiaNivesh Securities Ltd 5 May 2017 2 of 4

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